Keeping Your Balance

Small Business Cash Flow Advice

How To Manage Your Money

Losing control of cash flow is among the most common reasons why so many small businesses die young. It doesn't matter how great your idea is, or how strongly you want it to succeed. If you can't pay your bills the lights go out. Your business is a living thing, and your cash flow is the blood pumping through its veins.

Cash flow is simply a way of describing the money moving through your business, but it's not just a question of having more coming in than going out. If that gigantic payment you're counting on doesn't roll in on time, you'll quickly find yourself in the middle of a cash flow crisis. There will always be factors you can't control, but that's no excuse for not planning for them. If you're continually bumping up against your overdraft limit or being chased for payments by suppliers, you may have a problem. Research has shown that fully 20% of failed businesses would still be alive and kicking today if they'd understood their cash flow properly - and showing a bank that you've managed your cash flow well could go a long way toward getting that loan or overdraft extension you need to stay above ground.

Limited Companies weather the cash flow storm differently from other small businesses, offering limits to owners' personal liability when a disaster strikes that would bankrupt a Sole Trader. It might not save the company itself, but at least you've got some protection to fall back on.

The way you fix a cash flow problem depends on how bad it is. If you're still profitable, you might just need to tighten up your credit control or reduce your costs a little. If the crisis is more severe you'll have to take more drastic steps to keep your business alive. Doing "just enough" and "just in time" might keep you going for the moment, but you'll be hopping from one near-miss to the next until you get to the heart of the problem.

If this stuff sounds scary to you, then you're already on the right track. Many of the problems that sink small businesses come about because the people running them weren't scared enough - or at least soon enough. Maybe they sleepwalked into the trap over being "turnover-led", instead of "profit-led". Maybe they thought a high sales volume automatically meant they were doing well. Cash flow can be a tricky puzzle, but RIFT Accounting is here to help you solve it. We can help you with:

Forecasting. Unless you forecast, you’re unlikely understand how much you need and when you need it. If you apply for a loan, a bank will request a detailed cash flow forecast before even considering your application.

Debtors. Understanding how much money you’re owed and how this is going to affect your cash flow.

Understanding your cash position. Using Clear Books together, we can clearly see how much you have in the bank, how much you owe and how much you are owed, making sure you’re in full control of your business.

Top Tips For Managing Your Cash Flow

Rift will keep a close eye on your cash flow budget to watch for potential cash shortages. We'll help you develop warning systems to identify where unexpected changes or delays could cause the business to run out of cash. As a head-start, this checklist should be second nature to you: